AOL to pay $3M in settlement with states, including NJ

Averting a looming court battle over how it has been handling the exodus from its Internet dial-up service, AOL has agreed to make it easier for its remaining customers to leave as part of a $3 million settlement with 48 states, including New Jersey, and the District of Columbia.

The resolution announced today was driven by a deluge of complaints from AOL customers who said they tried to close their accounts, only to be thwarted in their attempts or discover they were still being billed for services that they thought had been canceled.

The outcry triggered a multistate investigation that would have culminated in a lawsuit if AOL hadn't agreed to ante up and to change its ways, said David Tiede, a deputy attorney general in California.

California was among the states that played a leading role in the settlement. New York and Florida were the only states that didn't participate in the inquiry.

AOL, the Internet division of Time Warner Inc., didn't acknowledge any wrongdoing in the settlement. The Dulles, Va.-based company said the investigation involved a tiny fraction of the cancellation requests that it has fielded through the years.

"AOL is pleased with this settlement, as it codifies a number of changes that were already made by AOL to improve our service to our members," the company said in a statement.

As part of the settlement, AOL agreed to set up an online channel to process customer cancellations. Although it has long been one of the Internet's best-known companies, AOL had previously required customers to make their cancellation requests by fax, mail or telephone.

Subscribers who phoned AOL to cancel their service sometimes were greeted by aggressive customer service representatives who were paid bonuses of up to $3,000 if they found a way to retain the business, according to the multistate settlement. Customers complained that AOL's incentive system created an obstructive culture that made service cancellations difficult.

"This is an important outcome for New Jersey consumers," New Jersey Attorney General Anne Milgram said in a statement. "As a result of this settlement, AOL customers who seek to cancel their Internet service will find the process simpler and more straightforward. In addition, AOL will now provide greater accountability regarding account cancellation transactions and billing practices."